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The combined effects of continuing weakness in the economy and the proliferation of supercenters and other formats that sell groceries made last year a disappointing one for supermarkets. Progressive Grocer's 56th Consumer Expenditures Study finds sales in almost all supermarket departments gained at significantly slower rates than in 2001, and in some instances declined.
Supermarket sales in 2002 rose to $375 billion. That 2 percent increase lagged considerably the 3.5 percent year-over-year gain recorded in 2001.
The study, which reports category sales in supermarkets for calendar year 2002, is primarily based on scan data from ACNielsen and estimates by Progressive Grocer research for nontracked perishables and general merchandise.
The only departments that improved their sales performance over 2001 were pharmacy, which gained 8.5 percent last year, compared with the prior year's 8 percent; nontracked general merchandise, fueled mostly by gasoline, up 12.4 percent, compared with the previous 11 percent; and self-service deli, which notched a one-tenth percentage point improvement to 10.7 percent. In-store bakery's sales gain was flat at 4.2 percent, and all other departments recorded slower rates of increase than in 2001.
Sales of nonfood groceries, tracked general merchandise, and health & beauty care declined in 2002 from the prior year.
If sales of supermarket-type merchandise through supercenters operated by mass merchandisers were included, last year's overall sales increase would be an estimated 3.3 percent. That's a significant indication of the market share supercenters, primarily those operated by Wal-Mart Stores, Inc., are taking from supermarkets, which vastly outnumber them.
Wal-Mart's decision several years ago to stop selling its scan data made it necessary to eliminate mass merchandisers' supercenter sales from the CES. Sales of supercenters operated by grocery chains are included in the study.
Sales of groceries and perishables through the 1,507 supercenters operated by Wal-Mart, Target, and Kmart came to an estimated $36.8 billion last year, up 21 percent from 2001. If they were added to supermarket sales, they would represent 8.9 percent of the combined total. That's up from 7.6 percent in 2001, despite financially troubled Kmart's cutback on supercenter operations. At $6.4 billion, the year-over-year increase in supercenter sales was only $800 million behind the $7.2 billion gain by the 10-times-larger supermarket channel.
While Wal-Mart supercenters are regarded as the biggest challenge to traditional supermarket operators, other formats are also selling an ever-increasing share of the nation's groceries. They include drug stores, convenience stores, dollar stores, and warehouse clubs, as well as the conventional discount stores run by mass merchandisers.
National concern over the obesity epidemic seems to be reflected in the CES numbers. Low-calorie and diet food products generally had sales growth that outpaced their categories. Dietetic chocolate (up 61.8 percent) and nonchocolate (up 11.6 percent) had the only double-digit gains in the candy category, which was down 0.4 percent overall.
In carbonated soft drinks, which rose 2.7 percent, diet colas were flat, but diet lemon/lime rose 6.1 percent and remaining diet beverages jumped 18.4 percent. Light beer had the biggest gains in the beer category for the second year in a row.
In the health & beauty care section, diet aids tacked an 11.5 percent gain on top of 2001's jump of 14.4 percent.
On a percentage basis, meal starters fared best and worst in the supermarket last year. Sales in the $17.5 million refrigerated meal starters category zoomed by 303.1 percent, an impressive gain even though it was less than a quarter of the category's 2001 increase. At the same time, sales of frozen meal starters plunged 29.7 percent to $51.02 million.
Among categories worth more than $100 million to supermarkets, gasoline was the standout, with sales leaping 50 percent to $1.9 billion as food retailers put fuel centers in more of their parking lots. This continued a trend that saw gasoline sales through the supermarket channel grow by 65 percent in 2001 and 88 percent in 2000.
Consumer fascination with tooth care continued in 2002. Oral hygiene appliances and accessories racked up a 50.4 percent gain after doubling sales in each of the previous two years, and dental accessories jumped 79.6 percent, following a 94.3 percent rise in 2001.